Summary The hair follicle (HF) is an excellent model system to study the molecular cross-talk between stem/progenitor cells with their niche microenvironment. During early hair morphogenesis, hair follicle-specified epithelial cells in hair placodes receive directive niche signals from specialized cells in dermal condensates (DC) that are the precursors of the mature HF mesenchyme, the dermal papilla (DP) and the dermal sheath (DS). After embryonic hair follicle formation, cells in the DP continue to send signals to rapidly proliferating transit amplifying cells during hair growth, and are critical for activating stem cells to initiate hair follicle regeneration during the hair cycle. The role of DS is much less clear, but recently DS has been implicated as a source of new DP over a lifespan by contributing cells to the DP compartment. Despite these insights, several fundamental questions remain to be answered: (1) What is the lineage and functional relationship between DS and DP? (2) What are essential functions of the DS for hair follicle growth? (3) What are the molecular mechanisms that govern DS identity and function? The goal of this work is to answer these fundamental questions by employing our recently established genetic tools to specifically label and target the mature DS and its embryonic precursors. We have previously established the methods to lineage-trace the DS and its precursors, purify for the first time DS cells separately from DP, define a DS-specific gene signature, test the requirement of DS for hair follicle growth, and target the DS for gene ablation, thereby altogether opening up the opportunity to study the core biological DS functions. This proposal aims to define the cellular dynamics and molecular mechanisms of the formation of the DS and its functions as a niche component. I will determine the clonal and proliferative dynamics with pulse- chase label retention experiments and lineage tracing of single-cell labeled DCs using established genetic targeting tools with reporter mice. I will also use an inducible labeling system to determine the proliferative dynamics of niche cells during follicle formation and growth. Additionally, I will selectively ablate the DS in hair follicles to determine their role in follicle growth and maintenance using genetic targeting tools and the inducible diphtheria toxin cytotoxic ablation system. Further, I will define the gene expression signature of the DS through systems-level analysis of our lab?s recently generated RNA-sequencing data from in vivo isolated cells. Finally, I will further investigate the role of the DS in the HF by gene ablation of the recently identified sheath transcription factor, Satb2, using genetic targeting tools and a conditional knock-out mouse line of Satb2. The strengths of this proposal lies in its innovation of using novel mouse tools to target mesenchymal niche cells within the hair follicle, and its potential to generate translatable findings for the development of future clinical applications.